Motives and Giving Norms Behind Remittances: The Case of Filipino Overseas Workers and their Recipient Households

Abstract

The literature has focused on motives to explain remittance behavior. But as nonanonymous transfers, remittances are apt to be influenced by giving norms as well. We formulate an empirical specification that takes account of remittance motives involving workerhousehold pairs. We find that altruism dominates the exchange motive among overseas workers who are likely to be the primary breadwinners of their recipient households. We also find that, in the subsample in which overseas workers are likely to be secondary breadwinners, (a)household labor income is an endogenous explanatory variable and(b) the error covariance of the householdincomeandremittanceselectionequationsispositive.Apossiblereasonfor(a)isthat secondarybreadwinnersusehouseholdincomeasanimperfectsignalofopportunitycostorto detectunobservedeffort,i.e.,moralhazard,ingeneratingincome.Asfor(b),wesurmisethatit indicates the presence of incentivecompatible mechanisms against moral hazard. On giving norms,wefindthat,insamplesthatincludeoverseasworkerswhoaresecondarybreadwinners, remittance amounts are afflicted with negative selectivity. We present evidence that this is consistentwithFilipinogivingpractices,inwhicheveryonegivesbutinmodestamounts.